Spanish jurisdiction clause in Spanish contract branded unfair

Barcelona-based Oceano sold encyclopaedias. Some of their customers defaulted on payments and Oceano sued in the Barcelona court, relying on a clause in the sale contract conferring exclusive jurisdiction on the Barcelona court in respect of any matter arising.

Topic: Jurisdiction

Who: Oceano Grupo Editorial SA (“Oceano”) and the European Court of Justice (“ECJ”)

When: June 2000

Where: Barcelona and Strasburg

What happened:

Barcelona-based Oceano sold encyclopaedias. Some of their customers defaulted on payments and Oceano sued in the Barcelona court, relying on a clause in the sale contract conferring exclusive jurisdiction on the Barcelona court in respect of any matter arising. The Spanish court felt it should refer the jurisdiction clause’s validity to the ECJ. The ECJ concluded that such a clause was likely to make it difficult for the consumer to appear before the court and thus could hinder or exclude the individual’s right to take legal action. This, combined with the greater ease with which the seller could use its local court created a “significant imbalance” between the parties’ rights and obligations to the detriment of consumers. This was just the sort of clause the Unfair Contract Terms Directive rendered unenforceable where, as here, it was contained in standard terms which were not negotiable. The ECJ also held that rather than passing the buck to the ECJ on jurisdiction questions and increasing the cost and delay, local coursts should so far as possible take it upon themselves to decline jurisdiction conferred on them by an unfair term.

Why this matters:

The case is timely as at exactly this time the EU institutions are debating amendments to the Brussels Regulation on Jurisdiction. Core to the ongoing debate is the consumer’s right to sue and be sued in his home country’s courts. Business interests argue an Oceano-type approach (preventing sellers from giving exclusive jurisdiction to their local courts) would place such an impossible burden on EU B2C business that sellers would refuse to sell products to buyers from outside their own countries. They also argue that the Oceano case is irrelevant as one ECJ decision cannot constitutionally bind the EC legislative institutions either way. Notwithstanding these fine jurisprudential points, should EU sellers, on-line and off-line, now remove jurisdiction clauses from all B2C contracts? Certainly providing for the courts of a named country to have non –exclusive rather than exclusive jurisdiction would be a step in the right direction. This allows for the operation of the present Brussels Convention rule that in B2C contracts a consumer is, subject to certain conditions, entitled to sue the seller in the consumer’s own courts. If the seller wishes to take action for unpaid bills then the existing rule is that the defendant should be sued in his place of domicile or, if different, the place of performance of the obligation in issue.